Morning Update

Best Buy Warning Unsettles

Stocks are under pressure after Best Buy slashed its outlook, underscoring the lack of confidence among consumers and the stiff headwinds the economy is facing. Crude oil is extending losses from yesterday and is trading at a 20-month low, and commodity prices continue to soften. Elsewhere, news is fairly light. American Express may be seeking government money, Macy's topped profit expectations, while the Bank of England acknowledged that deflation is a small possibility. Treasuries are little changed and world markets are mixed.

As of 8:34 a.m. ET, the December S&P 500 Index Globex futures contract is 9 points below fair value, the Nasdaq 100 Index is 17 points below fair value, and the DJIA is 74 points below fair value. Crude oil is down $0.66 to $58.67 per barrel, and gold is down $3.70 per ounce at $729.10. The overnight LIBOR rate increased 3 bp to 0.38%, and the three-month LIBOR rate fell 4 bp to 2.13%.

Treasuries near the flatline

Treasuries are trading nearly unchanged after yesterday's holiday. There are no major economic reports scheduled today.

Choppy day in Europe

European stocks jumped at the opening but quickly ran into turbulence from disappointing earnings and fell below the flatline, but shares have turned mixed afternoon action. Germany's SAP (SAP $34) is pushing ahead after the Financial Times reported the software company hired a former prominent executive from rival Oracle (ORCL $17). Neither firm commented. However, ING Group (ING $10) reported a 3Q net loss of 478 million euros, its first-ever quarterly loss. The Dutch financial services firm said it expects steep declines in equity markets, widening credit spreads, declining property prices, and the failure of several banks. Hypo Real Estate (HREHY $5), which had received private and government support recently, posted a much worse-than-expected pretax loss of 3.1 billion euros in the quarter just ended. And Swiss Life Holding (SZLMF $107) is falling after failing to update guidance, ending its stock buyback program, and cutting its dividend payout. The company sees a loss in 2008 and said reliable predictions are impossible given the uncertainty in financial markets.

Elsewhere, the Bank of England said its forecast for inflation is significantly lower than in August. The central bank said inflation will fall "well below" its 2% target and deflation is a small risk in 2009 if its key rate is left unchanged at 3%. Bank of England Governor Mervyn King said the Monetary Policy Committee is prepared to cut rates again if needed, and the pound fell sharply versus to the dollar to a six-year low.

A wounded bear

Elsewhere, trading in Russia's stock market was halted after its main index fell over 12%. Yesterday, the central bank widened its trading range for its currency and traders speculated the government was prepared to let the ruble weaken. In order to prevent foreign capital from fleeing the country, the central bank raised its key interest rate yesterday by a full percentage point. Political uncertainty, heavy-handed government tactics, nervous foreign investors, and plunging oil prices have been pressuring stocks in recent months. Today's losses are on top of a decline of 10% on Tuesday.

Pressure in Tokyo continues

Yesterday's weakness in the US spread to Japan, sending down the Nikkei 225 Index by 1.3%. Falling energy and commodity prices hit raw material stocks, while traders cautiously look to this weekend's G20 meeting of wealthy nations and larger emerging economies. Leaders are expected to address growing financial problems among developing nations and may talk about measures to support faltering worldwide growth.